The determinants of balance of trade in USA / Khalisah Zakiah Safien

This paper aims to investigate the determinant of balance of trade in United States. United States has been experiencing the trade deficit for years. The issue of this study is the continuously deficit trade balance results in the economy of the country. This paper used Balance of Trade (BOT) as the dependent variable and used domestic income, exchange rate, household consumption, foreign direct investment (FDI), and foreign income as independent variables. This paper using times series to run the result. The data was collected from year 1980 to 2015 and have 36 observations all together. In this study The Ordinary Least Square method (OLS) under the E-View software has been used for the econometric analysis. The result from this paper estimated to show, exchange rate, domestic income measures by GDP per capita and foreign income have significant relationship with balance of trade (BOT). Other two variables which are foreign direct investment (FDI) and household consumption are expected to have no significant relation with dependent variable. The sign for domestic income and exchange rate is negative while foreign income is positive. This study has no problem with heterokedasticity, normality test, and Multicollinearity. Unfortunately, this paper has the problem with Ramsey reset test and serial correlation.